New Neighborhood Market opening Wednesday in Diagonal Plaza

There currently are 14 larger-format grocery stores and supermarkets operating within Boulder, with Walmart Neighborhood Market set to open Wednesday and a Trader Joe's arriving next year, which will bring the total to 16.

1. Alfalfa's Market, 1651 Broadway

2. King Soopers, 6550 Lookout Road

3. King Soopers, 3600 Table Mesa Drive

4. King Soopers, 1650 30th St.

5. Lucky's Market, 3960 Broadway

6. Natural Grocers By Vitamin Cottage, 2355 30th St.

7. Safeway, 4800 Baseline Road

8. Safeway, 2798 Arapahoe Ave.

9. Safeway, 3325 28th St.

10. Sprouts Farmers Market, 2950 Baseline Road

11. Sprouts Farmers Market, 2525 Arapahoe Ave.

12. Trader Joe's, 1906 28th St. (Opening in 2014)

13. Walmart Neighborhood Market, 2972 Iris Ave. (Opening Wednesday)

14. Whole Foods Market, 2584 Baseline Road

15. Whole Foods Market, 1275 Alpine Ave.

16. Whole Foods Market, 2905 Pearl St.

The controversy about Walmart aside, when the world's largest retailer opens its Neighborhood Market store in Boulder this week, it will add another player to a local grocery market already teeming with competition.

Fourteen larger-format grocery stores and supermarkets operate within the city of Boulder. Safeway, Kroger's King Soopers division and Whole Foods Market each operate three stores and are complemented by natural and independent grocers that include Sprouts Farmers Market, Alfalfa's Market, Lucky's Market and Natural Grocers By Vitamin Cottage.

Add in the Neighborhood Market, which is slated to open its doors to shoppers Wednesday morning, and a Trader Joe's specialty grocery store that's due to arrive some time next year, and the total will rise to 16.

"We certainly appreciate the need to have a diversity of shopping options," said John Tayer, president and chief executive officer of the Boulder Chamber. "They certainly see an opportunity, and that's why they decided to open here."

Adiena Holder, general manager of the new Walmart Neighborhood Market at 2972 Iris Ave., said the 53,500-square-foot store's prices, selection and convenience-tailored layout would cater to area residents.

"I think there is a need for a Walmart in this area," she said.

'Disruptive' force

Bentonville, Ark.-based Wal-Mart Stores Inc. opened its first Neighborhood Market in 1999.

It closed out last year with 286 of the smaller-format grocery stores in the United States and has pushed that number above 300 through September, regulatory filings show.

The average Neighborhood Market, at 38,000 square feet, is about one-fifth the size of a typical Supercenter, and Walmart has become more efficient at operating its grocery stores, allowing for greater expansion, officials have said.

During the next 18 months, Walmart expects to grow its Neighborhood Market store base to "500 units and beyond," Bill Simon, president and CEO of Walmart U.S, said earlier this month when presenting at the Goldman Sachs Global Retail Conference.

Jordan Holloway, right, and his girlfriend Jamie Evavold shop for avocados Friday at the King Soopers on 30th Street in Boulder. With a Walmart Neighborhood Market set to open this week, and Trader Joe s following in 2014, Boulder s already crowded grocery market is gaining new competition.
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JEREMY PAPASSO
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"This is one of the fastest growing formats in retail, 60 percent growth ... we're very pleased with the format," Simon said at the conference, according to a transcript posted at Seeking Alpha.

The Neighborhood Markets were recording mid-single digit comparable store sales -- revenue measured and compared at stores that generally have been open at least a year -- performing well in "customer experience" measures and providing operating leverage to Walmart, Simon said, noting the same-store metrics were approaching those of the Supercenter.

Robin Sherk, an analyst who follows Walmart for Kantar Retail, said prices at a Neighborhood Market are typically on par with that of a Supercenter and below that of a traditional grocery store by a couple percentage points.

The stores are boxy with inexpensive fixtures, she said, adding that the Neighborhood Markets typically also have eliminated full-service counters in favor of pre-packed, to-go offerings.

The price points have made the concept compelling to shoppers and the results have been favorable for Walmart, she said.

"You're going to see this format accelerate," she said. "It's going to become part of the national lexicon."

The expansion of the Neighborhood Market concept has had significant effects on the broader grocery segment, said Mark Hamstra, retail and financial editor for Supermarket News, a New York-based trade magazine for the food distribution industry.

Most affected usually are the supermarkets and regional grocery chains, as Walmart tends to attract the lower- to middle-income customers who are not as concerned about the variety of products as they are about prices, he said.

"They (Walmart Neighborhood Markets) are priced very competitively, but they still -- to some degree -- have some of the same shortcomings as the Walmart Supercenter," he said. "That is, there's a perception that the variety and quality and service levels are not the same as you would find in a more traditional supermarket."

In Boulder, Walmart's chief competition would be King Soopers, Safeway and, in some sense, Target, Walmart's Adiena Holder said last week.

Grocery chains such as Safeway and King Soopers have competed head-to-head against Walmart in several markets and have fared better than smaller chains with less financial resources, said analysts Sherk and Hamstra.

"You might see companies like King Soopers and Safeway emphasizing more of their service departments, in-store bakeries, meat-cut-to-order ... touted more in their advertising," Hamstra said.

'Pie obviously gets smaller'

Kris Staaf, a spokeswoman for Safeway's regional office in Denver, said it is a company policy to not comment about competition, but noted the company would continue to work hard to serve residents in Boulder.

"We've been in Boulder for quite some time, and I think given the recent natural disaster and floods that impacted our customers, we've worked hard to step up -- whether that's food for first responders or raising funds," she said. "That's something that is woven in, that we do day in and day out."

Kelli McGannon, a spokeswoman for King Soopers, would not address specific competitors, but said the regional chain's goal is to continue to be local, provide fresh products, fast checkouts, low prices and strong customer service.

"I don't think, for us, anything specific changes," she said. "We just have to continue to work hard to earn (shoppers') business no matter who the competitor is."

McGannon declined to address whether the Boulder King Soopers stores would offer special promotions in the wake of this week's new arrival.

"We think that our prices and variety are certainly points of differentiation for us than any competitor," she said. "At the end of the day, the customer wins with competition and competition makes us all better."

It remains to be seen whether there is enough market share to go around when Walmart and Trader Joe's open in Boulder, said Bo Sharon, founder and owner of Lucky's Market. Sharon's Boulder-based grocer recently opened a second location in Longmont and has plans for several more Lucky's dotted across the United States.

While lauding that competition benefits consumers and forces retailers to perform their best, Sharon said he expects that Walmart and Trader Joe's would end up redistributing existing grocery store sales.

"The reality is, the pie obviously gets smaller," he said.

When Albertsons closed its Boulder stores, including the location at Diagonal Plaza, the neighboring Safeway store at 3325 28th St. most likely picked up some sales, he said.

"Perhaps they'll shift back," Sharon added.

Some Boulder shoppers say their habits are tied to store loyalty, location, personal beliefs and prices.

Customer loyalties

On a recent weekday, Griffin Ameen placed a bag of King Soopers groceries in his backpack, zipped up the satchel and readied his skateboard for a ride home a couple blocks away from the store off 30th Street and Arapahoe Avenue.

His loyalty resides with King Soopers, primarily because of its proximity.

"To be honest, I don't have a car, and don't want to go far," said Ameen, 25.

Lynn Stuart, 57, of Boulder, said that the new arrival of Walmart would not change her shopping patterns.

"I will never, ever shop at a Walmart," she said. "I don't like that they come into towns and undercut prices."

While other residents and city officials -- including Boulder's deputy mayor -- have shared similar sentiments about Walmart, the store's prices are favorable to residents like Kelly Cirbo, 25.

"I'd shop there," he said. "I like Walmart; I'm a fan."

Laurie Radatz, 53, said she didn't have the best experiences or perceptions of Walmart when she lived on the West Coast and now shops at Target and Safeway.

"I don't really shop at Walmart," she said. "My husband, on the other hand, does."

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